Property Law: Case Digests (Arts 414-418)

Property

PNB v. CA 82 SCAD 472, G.R. No. 118357 May 6, 1997

Facts:  

• In 1949, Jesus S. Cabarrus founded Marinduque Mining and Industrial Corporation (MMIC).
• In 1953, Cabarrus established J. Cabarrus, Inc., later renamed Industrial Enterprises, Inc. (IEI).
• Cabarrus and his family owned about 12% to 14% of MMIC shares, and he was also the President of IEI.
• In 1979, IEI entered a coal operating contract with the Bureau of Energy Development (BED) in for coal blocks in Eastern Samar.
• In 1981, IEI applied for additional coal blocks adjacent to the initial contract area.
• In 1982, Minister of Energy Geronimo Velasco informed Cabarrus that MMIC would be awarded the blocks instead of IEI.
• IEI and MMIC entered a Memorandum of Agreement (MOA) in which IEI assigned all its rights and interests on the coal operating contract to MMIC.
• MMIC took over possession of the coal blocks but ceased exploration and development.
• IEI demanded reimbursement from MMIC for expenses incurred on the project.
• In 1984, IEI filed a complaint against MMIC and Minister Velasco for rescission of the MOA and damages.
• MMIC defaulted on loans with Philippine National Bank (PNB) and Development Bank of the Philippines (DBP).
• PNB and DBP initiated foreclosure proceedings on MMIC assets, including those assigned by IEI.
• IEI filed a complaint against MMIC and PNB for damages and to nullify the foreclosure sale.
• RTC-Makati: Ruled in favor of IEI, holding MMIC and PNB jointly liable for damages and nullifying the foreclosure sale.
• Court of Appeals: Affirmed the lower court's decision.

Issue: 

• Whether the assignment of private respondent's "rights and interests." is valid. YES

Held:

The MOA was an assignment of private respondent's "rights and interests on the Coal Operating Contract described in the first whereas clause" thereof. In its most general and comprehensive sense, an assignment is "a transfer or making over to another of the whole of any property, real or personal, in possession or in action, or of any estate or right therein. It includes transfers of all kinds of property, and is peculiarly applicable to intangible personal property and, accordingly, it is ordinarily employed to describe the transfer of non-negotiable choses in action and of rights in or connected with property as distinguished from the particular item or property." 

An assignment is a contract between the assignor and the assignee. It generally operates by way of such contract or agreement. It is subject to the same requisites as to validity of contracts. Whether or not a transfer of a particular right or interest is an assignment or some other transactions depends, not on the name by which it calls itself, but on the legal effect of its provisions. This rule applies in determining whether a particular transaction is an assignment or a sale. 

As the aforequoted portions of the MOA state, its subject is described in the "whereas clauses" thereof as follows:

WHEREAS, IEI is the duly authorized operator over two coal blocks over an area outlined and more particularly described in Annex "A" of the Coal Operating Contract entered into on the 27th day of July 1979 and between the Ministry of Energy, through the Bureau of Energy Development ("BED"), and IEI; the Coal Operating Contract and Annex A thereof being hereto attached and made an integral part of this contract;

Annex "A" of the coal operating contract is the technical description of the 2,000-hectare coal-bearing land in Carbon, Magsaysay, Eastern Samar. Therefore, as expressed in the MOA, the subject of the assignment was only private respondent's rights and interests over the coal operating contract covering said coal-rich land in Eastern Samar.

However, a close scrutiny of the contract reveals that the MOA includes all tangible things found in the coal-bearing land. Unquestionably, rights may be assigned as they are intangible personal properties.

The term "interests," on the other hand, is broader and more comprehensive than the word "title" and its definition in a narrow sense by lexicographers as any right in the nature of property less than title, indicates that the terms are not considered synonymous. It is practically synonymous, however, with the word "estate" which is the totality of interest which a person has from absolute ownership down to naked possession. An "interest" in land is the legal concern of a person in the thing or property, or in the right to some of the benefits or uses from which the property is inseparable. 

That the MOA conveyed to MMIC more than the title to or rights over the coal operating contract but also the "things" covered thereby, is manifest in the manner by which the parties, particularly private respondent IEI, implemented the MOA. It disclosed the intention to include in the MOA the equipment and machineries used in coal exploration. This intention is evident in the following letters of private respondent:

1. letter of April 16, 1984 to Alfredo Velayo, President of MMIC, where private respondent, through Cabarrus, included in the conditions for the negotiated rescission of the MOA, the payment to private respondent of the amount of ten million pesos (P10,000,000.00) for expenses such as those for the "recondition (of) the equipment which have been left to the elements;"
2. letter of May 2, 1984 to Velayo, where private respondent mentioned a "list of probable equipment(s) that IEI would be interested to apply as part payment in the event of rescission of contract;"
3. letter of June 4, 1984 to Zalamea as Chairman of the Board of the MMIC, 51 where private respondent attached an updated statement of account and the expenses for rehabilitation of equipment, and
4. letter of August 15, 1984 to petitioner and the DBP where private respondent enclosed a copy of "the movable properties included in said Memorandum of Agreement" of August 1983.

 Notably, all these listed equipment were sold at the foreclosure sale initiated by petitioner. 

Also worth noting is the absence of proof that, like a good father of the family, private respondent exerted some effort to take the chattels out of the premises upon the execution of the MOA. All that private respondent proved, through the testimony of Cabarrus, was that the equipment and machineries were taken over by MMIC, piled up and left to rot that trees even grew on them. Coupled with this is private respondents' failure to prove the presence of insurmountable force that would have prevented it from retrieving its equipment and machineries from the Giporlos Project area. All these show that private respondent considered these chattels as subjects of the MOA.

Private respondent had all the right to exclude these chattels from the MOA because they were not expressly stipulated therein. However, its sheer inaction upon the execution of the MOA and its subsequent admissions through the aforesaid letters, conclusively show that these equipment and machineries were subjects of the assignment of rights to MMIC. It was only when the foreclosure sale was about to take place that private respondent lifted a finger to object thereto on the ground that the consideration stipulated in the MOA had not yet been paid by MMIC.

Moreover, while the MOA was expressly a contract for the assignment of rights and interests, it is in fact a contract of sale. Under Art. 1458 of the Civil Code, by the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. By the MOA, private respondent obligated itself to transfer ownership of the coal operating contract and the properties found therein. The coal operating contract is a determinate thing as it has been particularly designated in the MOA. The subject of the coal operating contract was physically segregated from all other pieces of coal-rich Eastern Samar property by the technical description attached to said contract. A list of the equipment and machineries found on the property might not have been attached to the MOA but these were itemized with specificity in private respondent's letter of August 15, 1984.

Private respondent delivered the properties subject of the contract to MMIC, which immediately gained control and possession of the Giporlos Project. This is explicit in private respondent's numerous demand letters which are exemplified by its letter of February 7, 1984 to Zalamea which states:

Considering that all details necessary to determine the final purchase price are in place; considering that the property has already been transferred in your name; and considering finally that cash payment is stipulated in the contract, demand is hereby respectfully made for the payment of the purchase price soonest.

Another very telling letter of private respondent is that of April 16, 1984 to Mr. Alfredo Velayo, President of MMIC, which partly reads:

After the Memorandum of Agreement was signed, BED promptly approved the transfer from IEI to MMIC. After the price was fixed with the assistance of SGV and BED, MMIC took over the entire project last July 1983. . . . 

For its part, MMIC never denied that it had taken possession and control over the Giporlos Project. In its replies to private respondent's demand letters, MMIC in fact acknowledged its obligations under the MOA while professing incapacity to fulfill the same.

If the MOA merely embodied an assignment of rights over the coal-operating contract and the properties found in the Giporlos Project and not a sale thereof, then private respondent would not have insisted on the payment of MMIC's obligations under the MOA by attaching a statement of account to most of its demand letters. In assignments, a consideration is not always a requisite, unlike in sales. Thus, an assignee may maintain an action based on his title and it is immaterial whether or not he paid any consideration therefor. Furthermore, in an assignment, title is transferred but possession need not be delivered. In this case, private respondent transferred possession over the subjects of the "assignment" to MMIC.

Since the MOA was actually a contract of sale, MMIC acquired ownership over the Giporlos Project when private respondent delivered it to MMIC. Under the Civil Code, unless the contract contains a stipulation that ownership of the thing sold shall not pass to the purchaser until he has fully paid the price, ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. In other words, payment of the purchase price is not essential to the transfer of ownership as long as the property sold has been delivered. Such delivery (traditio) operated to divest the vendor of title to the property which may not be regained or recovered until and unless the contract is resolved or rescinded in accordance with law. 

Consequently, the properties in the Giporlos Project were, therefore, owned by MMIC notwithstanding its failure to pay the consideration stipulated in the MOA. Private respondent, after such delivery and MMIC's continuous refusal to pay the consideration for the contract, correctly opted to rescind the contract. That private respondent did not succeed in collecting payment prior to the filing of the complaint for rescission with damages is a fault entirely attributable to MMIC which at the time, acted upon the orders of government authorities.

It is erroneous for private respondent and the courts below to impute bad faith on the part of petitioner for foreclosing the properties in the Giporlos Project. Petitioner was simply acting in accordance with its rights as mortgagee. The MTA, as amended, clearly provides that the mortgage covers even "after-acquired" properties. Because petitioner was simply implementing this contractual provision of the MTA, its knowledge that MMIC had not yet paid the consideration stipulated in the MOA could not have resulted in foreclosure in bad faith. After all, petitioner was a total stranger as regards the MOA.

Similarly, neither may petitioner be deemed to have conspired with MMIC and government authorities in divesting private respondent of its rights over the Giporlos Project. Petitioner's involvement consisted in its exercising its right to foreclose the mortgage only after the MOA, which effectively wrenched the Giporlos Project from private respondent's control, had become a fait accompli. A lawful act, done in a lawful way, no matter how damaging the result, never lays the basis for a claim of fraudulent conspiracy. 68 That a scheme to favor the financially strapped MMIC over private respondent had been hatched and was in existence when the MOA was executed is now beyond this Court's adjudicatory power. Suffice it to state that an action may be maintained against persons who falsely and fraudulently recommend an insolvent person as worthy of credit, by reason of which plaintiff is induced to trust him. 

In view of the noninvolvement of petitioner in the alleged conspiracy to strip private respondent of the its rights over the Giporlos Project, petitioner cannot be made solidarily liable with the MMIC for damages. However, although petitioner's rights to foreclose the mortgage and to subject the equipment of private respondent to the foreclosure sale are unassailable, we find that the foreclosure proceedings fell short of the requirements of the law.

The provision of the MTA vesting petitioner as trustee with the authority to choose the place where the sale of the properties involved therein should be made is clearly in contravention of the following provisions of Act No. 3135 as amended:

Sec. 2. Said sale cannot be made legally outside the province in which the property sold is situated; and in case the place within said province in which the sale is to be made is the subject of stipulation, such sale shall be made in said place or in the municipal building of the municipality in which the property or part thereof is situated.

The Giporlos Project is situated in Eastern Samar, a province separate and distinct from Samar where the foreclosure sale took place. Hence, the foreclosure sale is null and void. Even the Chattel Mortgage Law (Act No. 1508) relied upon by private respondent in assailing the propriety of the public auction sale in Samar, provides that the said sale should be made "in the municipality where the mortgagor resides" or "where the property is situated." It has not been established that petitioner considered Catbalogan, Samar where the foreclosure sale was conducted, as its "residence."

Moreover, the designation of a special sheriff to conduct the foreclosure sale is questionable. According to Sheriff Malindog, he was designated as a special sheriff by the judge of the Regional Trial Court of Samar, through the clerk of court, upon the request of petitioner's counsel, one Atty. Aliena, even though there was a sheriff in Eastern Samar.

Appointment of special sheriffs for the service of writs of execution or for the purpose of conducting a foreclosure sale under Act No. 3135 is allowed only when there is no sheriff in the area where the property involved is located or when the sheriff himself is involved in the action. This restriction is founded on the requirement of law that sheriffs who take delivery of money or property in trust must be duly bonded. The said situations calling for the appointment of a special sheriff being absent in this case, the appointment of Malindog as a special sheriff by the judge of the Regional Trial Court of Samar is unauthorized. Such lack of authority resulted in the nullification of the foreclosure sale conducted by Malindog.

Ordinarily, by the nullification of the foreclosure sale, the properties involved would revert to their original status of being mortgaged. However, the situation in this case is an exception to that rule. The MOA, the source of MMIC's right of ownership over the properties sold at the foreclosure sale, has been rescinded. Consequently, petitioner should exclude said properties from the MMIC's properties which were mortgaged pari passu to the petitioner and DBP through the MTA. However, since the foreclosed properties had been turned over to the Asset Privatization Trust, petitioner must reimburse private respondent the value thereof at the time of the foreclosure sale.

WHEREFORE, the Decision of the Court of Appeals is hereby REVERSED and SET ASIDE insofar as it renders petitioner solidarily liable with Marinduque Mining and Industrial Corporation for damages and AFFIRMED insofar as it nullifies the foreclosure sale of August 31, 1984. Petitioner Philippine National Bank shall exclude the properties sold at the foreclosure sale from the mortgaged properties of Marinduque Mining and Industrial Corporation and return the same to private respondent Industrial Enterprises Inc. or, should such return be not feasible, reimburse said private respondent the value thereof at the time of the foreclosure sale.

Leung Yee v. Strong Machinery, 37 Phil 644, G.R. No. L-1165, February 15, 1918, Building

Facts:  

• The “Compania Agricola Filipina” purchased from “Strong Machinery Co.” rice-cleaning machines which the former installed in one of its buildings. As security for the purchase price, Agricola executed a chattel mortgage on the machines and the building on which they had been installed. 
• Upon Agricola’s failure to pay, the registered mortgage was foreclosed, and the building was purchased by the seller, Strong Machinery This sale was annotated in the Chattel Mortgage Registry. 
• Later, Agricola also sold to Strong Machinery the lot on which the building had been constructed. This sale was not registered in the Registry of Property but the Strong Machinery took possession of the building and the lot. 
• Previously however, the same building had been purchased at a sheriff’s sale by Leung Yee, a creditor of Agricola, although Leung Yee knew all the time of the prior sale in favor of Strong Machinery. This sale in favor of Leung Yee was recorded in the Registry. 
• Leung Yee now sues to recover the property from Strong Machinery.

Issue: 

• Whether Leung Yee has the right to recover possession of the building from the machinery company. NO

Held:

The registry here referred to is of course the registry of real property, and it must be apparent that the annotation or inscription of a deed of sale of real property in a chattel mortgage registry cannot be given the legal effect of an inscription in the registry of real property. By its express terms, the Chattel Mortgage Law contemplates and makes provision for mortgages of personal property; and the sole purpose and object of the chattel mortgage registry is to provide for the registry of "Chattel mortgages," that is to say, mortgages of personal property executed in the manner and form prescribed in the statute. The building of strong materials in which the rice-cleaning machinery was installed by the "Compañia Agricola Filipina" was real property, and the mere fact that the parties seem to have dealt with it separate and apart from the land on which it stood in no wise changed its character as real property. It follows that neither the original registry in the chattel mortgage of the building and the machinery installed therein, not the annotation in that registry of the sale of the mortgaged property, had any effect whatever so far as the building was concerned.

But it appearing that he had full knowledge of the machinery company's claim of ownership when he executed the indemnity bond and bought in the property at the sheriff's sale, and it appearing further that the machinery company's claim of ownership was well founded, he cannot be said to have been an innocent purchaser for value. He took the risk and must stand by the consequences; and it is in this sense that we find that he was not a purchaser in good faith.

Standard Oil Co. v. Jaranillo 44 Phil. 631, G.R. No. L-20329, March 16, 1923, Ministerial Duty

Facts:  

• Gervasia de la Rosa, Vda. de Vera was renting a parcel of land in Manila and constructed a building of strong materials thereon.
• She conveyed the leasehold interest in the parcel of land and the building to the Standard Oil Company of New York through a chattel mortgage.
• Joaquin Jaramillo, the register of deeds of the City of Manila, refused to record the document, arguing that the interest mortgaged did not appear to be personal property as required by the Chattel Mortgage Law.

Issue: 

• Whether the deed may be registered in the chattel mortgage registry. YES

Held:

We are of the opinion that the position taken by the respondent is untenable; and it is his duty to accept the proper fee and place the instrument on record. The duties of a register of deeds in respect to the registration of chattel mortgage are of a purely ministerial character; and no provision of law can be cited which confers upon him any judicial or quasi-judicial power to determine the nature of any document of which registration is sought as a chattel mortgage.

In the light of what has been said it becomes unnecessary for us to pass upon the point whether the interests conveyed in the instrument now in question are real or personal; and we declare it to be the duty of the register of deeds to accept the estimate placed upon the document by the petitioner and to register it, upon payment of the proper fee.

Prudential Bank v. Panis, G.R. No. 50008, Aug 31, 1988, Building

Facts:  

• In 1971, Spouses Fernando and Teodula Magcale obtained a loan of P70,000 from Prudential Bank, secured with a deed of Real Estate Mortgage over a residential building and land.
• The mortgage included a rider stating that if a Sales Patent was issued for the mortgaged lot, the Register of Deeds could hold registration until the mortgage was canceled or annotate the encumbrance on the title.
• In 1973, The spouses obtained a second loan of P20,000, using the same properties as collateral. A second mortgage deed was executed and registered.
• The Secretary of Agriculture issued Miscellaneous Sales Patent over the mortgaged lot, leading to the issuance of Original Certificate of Title to Fernando Magcale on May 15, 1972.
• Due to non-payment of the loans, the mortgages were foreclosed, and the properties were sold to Prudential Bank in a public auction.
• CFI-Zambales: Declared the deeds of real estate mortgage null and void.

Issue: 

• Whether a valid real estate mortgage can be constituted on the building erected on the land belonging to another. YES

Held:

In the enumeration of properties under Article 415 of the Civil Code of the Philippines, this Court ruled that, "it is obvious that the inclusion of "building" separate and distinct from the land, in said provision of law can only mean that a building is by itself an immovable property." 

Thus, while it is true that a mortgage of land necessarily includes, in the absence of stipulation of the improvements thereon, buildings, still a building by itself may be mortgaged apart from the land on which it has been built. Such a mortgage would be still a real estate mortgage for the building would still be considered immovable property even if dealt with separately and apart from the land. In the same manner, this Court has also established that possessory rights over said properties before title is vested on the grantee, may be validly transferred or conveyed as in a deed of mortgage.

But it is a different matter, as regards the second mortgage executed over the same properties on May 2, 1973 for an additional loan of P20,000.00 which was registered with the Registry of Deeds of Olongapo City on the same date. Relative thereto, it is evident that such mortgage executed after the issuance of the sales patent and of the Original Certificate of Title, falls squarely under the prohibitions stated in Sections 121, 122 and 124 of the Public Land Act and Section 2 of Republic Act 730, and is therefore null and void.

Toledo-Banaga v. CA 102 SCAD 906, 302 SCRA 331,G.R. No. 127941, January 28, 1999, Ministerial Duty

Facts:  

• Biblia Toledo-Banaga lost her right to redeem her property earlier foreclosed and which was subsequently sold at public auction to Candelario Damalerio.
  • CA: Reversed the decision, allowing Banaga to redeem the property within a specific period.
• Banaga tried to redeem the property by depositing with the trial court the amount of redemption which was financed by co-petitioner Jovita Tan.
• Damalerio opposed Banaga's redemption attempt.
• RTC-GenSan: Upheld the redemption, ordering the cancellation of Damalerio's titles and issuing new ones to Banaga.
• CA: Set aside the trial court's orders and declared Damalerio as the absolute owner of the property.
• The decision became final and executory. The trial court issued a writ of execution ordering the reinstatement of titles in Damalerio's name.
• The Register of Deeds refused to comply alleging that the Certificates of Title issued to petitioner Tan must first be surrendered. 

Issue: 

• Whether the Register of Deeds is justified in refusing to issue Certificates of Title on the ground that the matter should be referred "en consulta" to the Register of Deeds. NO

Held:

Petitioners contention that the execution of the final and executory decision — which is to issue titles in the name of private respondent — cannot be compelled by mandamus because of the "formality" that the registered owner first surrenders her duplicate Certificates of Title for cancellation per Section 80 of Presidential Decree 1529 cited by the Register of Deeds, bears no merit. In effect, they argue that the winning party must wait execution until the losing party has complied with the formality of surrender of the duplicate title. Such preposterous contention borders on the absurd and has no place in our legal system. Precisely, the Supreme Court had already affirmed the CA's judgment that Certificates of Title be issued in private respondent's name. To file another action just to compel the registered owner, herein petitioner Tan, to surrender her titles constitute violation of, if not disrespect to, the orders of the highest tribunal. Otherwise, if execution cannot be had just because the losing party will not surrender her titles, the entire proceeding in the courts, not to say the efforts, expenses and time of the parties, would be rendered nugatory. It is revolting to conscience to allow petitioners to further avert the satisfaction of their obligation because of sheer literal adherence to technicality,  or formality of surrender of the duplicate titles. The surrender of the duplicate is implied from the executory decision since petitioners themselves were parties thereto. Besides, as part of the execution process, it is a ministerial function of the Register of Deeds to comply with the decision of the court to issue a title and register a property in the name of a certain person, especially when the decision had attained finality, as in this case.

In addition, the enforcement of final and executory judgment is likewise a ministerial function of the courts  and does not call for the exercise of discretion. Being a ministerial duty, a writ of mandamus lies to compel its performance. Moreover, it is axiomatic that where a decision on the merits is rendered and the same has become final and executory, as in this case, the action on procedural matters or issues becomes moot and academic. Thus, the so-called consulta to the Commissioner of Land Registration, which is not applicable herein, was only a naive and belated effort resorted to by petitioners in order to delay execution. If petitioners desire to stop the enforcement of a final and executory decision, they should have secured the issuance of a writ of preliminary injunction, but which they did not avail knowing that there exists no legal or even equitable justifications to support it.

Davao Sawmill v. Castillo – 61 Phil 709, G.R. No. L-40411,  August 7, 1935, Machines placed and mounted on foundations of cement

Facts:  

• Davao Saw Mill Co., Inc., holds a lumber concession and operates a sawmill on land belonging to another person.
• The lease agreement stipulates that improvements and buildings erected by the lessee will belong to the lessor upon expiration or abandonment of the lease, except for machinery and accessories.
• Davao Saw Mill Co., Inc., has treated machinery as personal property in previous transactions, including executing chattel mortgages.

Issue: 

• Whether the machines which were placed and mounted on foundations of cement are personal properties. YES

Held:

A similar question arose in Puerto Rico, and on appeal being taken to the United States Supreme Court, it was held that machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any person having only a temporary right, unless such person acted as the agent of the owner.

That machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant. Such result would not be accomplished, therefore, by the placing of machinery in a plant by a tenant or a usufructuary or any person having only a temporary right. The distinction rests, upon the fact that one only having a temporary right to the possession or enjoyment of property is not presumed by the law to have applied movable property belonging to him so as to deprive him of it by causing it by an act of immobilization to become the property of another. 

BH Berkenkotter v. Cu Unjieng 61 Phil. 663, G.R. No. L-41643, July 31, 1935, After-Acquired Properties

Facts:  

• Mabalacat Sugar Co., Inc. obtained a loan from Cu Unjieng e Hijos. secured by a first mortgage on two parcels of land with all its buildings and improvements.
• Mabalacat Sugar Co., Inc. decided to increase the capacity of sugar central by buying additional machinery and equipment.
• The president of said corporation, proposed to B.H. Berkenkotter, to advance the necessary amount for the purchase of said machinery and equipment, promising to reimburse him as soon as he could obtain an additional loan from the mortgagees, Cu Unjieng e Hijos.

Issue: 

• Whether the additional machines are also considered mortgaged. YES

Held:

If the installation of the machinery and equipment in question in the central of the Mabalacat Sugar Co., Inc., in lieu of the other of less capacity existing therein, for its sugar industry, converted them into real property by reason of their purpose, it cannot be said that their incorporation therewith was not permanent in character because, as essential and principal elements of a sugar central, without them the sugar central would be unable to function or carry on the industrial purpose for which it was established. Inasmuch as the central is permanent in character, the necessary machinery and equipment installed for carrying on the sugar industry for which it has been established must necessarily be permanent.

1. That the installation of a machinery and equipment in a mortgaged sugar central, in lieu of another of less capacity, for the purpose of carrying out the industrial functions of the latter and increasing production, constitutes a permanent improvement on said sugar central and subjects said machinery and equipment to the mortgage constituted thereon (article 1877, Civil Code); 
2. that the fact that the purchaser of the new machinery and equipment has bound himself to the person supplying him the purchase money to hold them as security for the payment of the latter's credit, and to refrain from mortgaging or otherwise encumbering them does not alter the permanent character of the incorporation of said machinery and equipment with the central; and 
3. that the sale of the machinery and equipment in question by the purchaser who was supplied the purchase money, as a loan, to the person who supplied the money, after the incorporation thereof with the mortgaged sugar central, does not vest the creditor with ownership of said machinery and equipment but simply with the right of redemption.

People’s Bank & Trust v. Dahican Lumber, G.R. No. L-17500, May 16, 1967, After-Acquired Properties

Facts:  

• Atlantic Gulf & Pacific Company of Manila (ATLANTIC) sold its rights in the Dahican Lumber concession to Dahican Lumber Company (DALCO).
• DALCO obtained loans from People's Bank & Trust Company (BANK) and Export-Import Bank of Washington D.C. to develop the concession.
• DALCO executed mortgages in favor of the BANK and ATLANTIC as security for the loans.
• The deeds contained a provision extending the mortgage lien to "after acquired properties."
• The mortgages were registered in the Office of the Register of Deeds.
• After the mortgages were executed, DALCO purchased additional equipment, spare parts, and supplies.
• DALCO rescinded agreements for the sale of equipment.
• The BANK demanded cancellation of the rescission agreements, leading to foreclosure proceedings.

Issue: 

• Whether the mortgages are valid and binding on the "after acquired properties" inspite of the fact that they were not registered in accordance with the provisions of the Chattel Mortgage Law. YES

Held:

Article 415 does not define real property but enumerates what are considered as such, among them being machinery, receptacles, instruments or replacements intended by owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and shall tend directly to meet the needs of the said industry or works.

On the strength of the above-quoted legal provisions, the lower court held that inasmuch as "the chattels were placed in the real properties mortgaged to plaintiffs, they came within the operation of Art. 415, paragraph 5 and Art. 2127 of the New Civil Code".

We find the above ruling in agreement with our decisions on the subject:

(1) In Berkenkotter vs. Cu Unjieng, 61 Phil. 663, We held that Article 334, paragraph 5 of the Civil Code (old) gives the character of real property to machinery, liquid containers, instruments or replacements intended by the owner of any building or land for use in connection with any industry or trade being carried on therein and which are expressly adapted to meet the requirements of such trade or industry.

(2) In Cu Unjieng e Hijos vs. Mabalacat Sugar Co., 58 Phil. 439, We held that a mortgage constituted on a sugar central includes not only the land on which it is built but also the buildings, machinery and accessories installed at the time the mortgage was constituted as well as the buildings, machinery and accessories belonging to the mortgagor, installed after the constitution thereof .

It is not disputed in the case at bar that the "after acquired properties" were purchased by DALCO in connection with, and for use in the development of its lumber concession and that they were purchased in addition to, or in replacement of those already existing in the premises on July 13, 1950. In Law, therefore, they must be deemed to have been immobilized, with the result that the real estate mortgages involved herein — which were registered as such — did not have to be registered a second time as chattel mortgages in order to bind the "after acquired properties" and affect third parties.

But defendants, invoking the case of Davao Sawmill Company vs. Castillo, 61 Phil. 709, claim that the "after acquired properties" did not become immobilized because DALCO did not own the whole area of its lumber concession all over which said properties were scattered.

The facts in the Davao Sawmill case, however, are not on all fours with the ones obtaining in the present. In the former, the Davao Sawmill Company, Inc., had repeatedly treated the machinery therein involved as personal property by executing chattel mortgages thereon in favor of third parties, while in the present case the parties had treated the "after acquired properties" as real properties by expressly and unequivocally agreeing that they shall automatically become subject to the lien of the real estate mortgages executed by them. In the Davao Sawmill decision it was, in fact, stated that "the characterization of the property as chattels by the appellant is indicative of intention and impresses upon the property the character determined by the parties" (61 Phil. 112, emphasis supplied). In the present case, the characterization of the "after acquired properties" as real property was made not only by one but by both interested parties. There is, therefore, more reason to hold that such consensus impresses upon the properties the character determined by the parties who must now be held in estoppel to question it.

Moreover, quoted in the Davao Sawmill case was that of Valdez vs. Central Altagracia, Inc. (225 U.S. 58) where it was held that while under the general law of Puerto Rico, machinery placed on property by a tenant does not become immobilized, yet, when the tenant places it there pursuant to contract that it shall belong to the owner, it then becomes immobilized as to that tenant and even as against his assignees and creditors who had sufficient notice of such stipulation. In the case at bar it is not disputed that DALCO purchased the "after acquired properties" to be placed on, and be used in the development of its lumber concession, and agreed further that the same shall become immediately subject to the lien constituted by the questioned mortgages. There is also abundant evidence in the record that DAMCO and CONNELL had full notice of such stipulation and had never thought of disputed validity until the present case was filed. Consequently all of them must be deemed barred from denying that the properties in question had become immobilized.

Board of Assessment v. Meralco 10 SCRA 68,G.R. No. L-15334, January 31, 1964, Steel Towers

Facts: 

• Manila Electric Company (MERALCO) generates electric power at Botocan Falls, Laguna, and transmits it to Manila via high-voltage transmission wires attached to steel towers.
• Meralco constructed 40 steel towers within Quezon City to support these transmission wires.
• The City Assessor of Quezon City declared these steel towers for real property tax.
• The Board of Assessment Appeals required Meralco to pay P11,651.86 as real property tax on the said steel towers for the years 1952 to 1956.
• Meralco paid under protest.
• CTA: Ordered the cancellation of the tax declarations and the refund of P11,651.86 to Meralco.
• The steel towers come within the term "poles" which are declared exempt from taxes under part II paragraph 9 of respondent's franchise;
• The steel towers are personal properties and are not subject to real property tax; 

Issue: 

• Whether the steel towers or poles of the MERALCO considered personal properties. YES

Held:

The steel towers or supports in question, do not come within the objects mentioned in paragraph 1, because they do not constitute buildings or constructions adhered to the soil. They are not construction analogous to buildings nor adhering to the soil. 

As per description, given by the lower court, they are removable and merely attached to a square metal frame by means of bolts, which when unscrewed could easily be dismantled and moved from place to place. 

They can not be included under paragraph 3, as they are not attached to an immovable in a fixed manner, and they can be separated without breaking the material or causing deterioration upon the object to which they are attached. 

Each of these steel towers or supports consists of steel bars or metal strips, joined together by means of bolts, which can be disassembled by unscrewing the bolts and reassembled by screwing the same. 

These steel towers or supports do not also fall under paragraph 5, for they are not machineries, receptacles, instruments or implements, and even if they were, they are not intended for industry or works on the land. Petitioner is not engaged in an industry or works in the land in which the steel supports or towers are constructed.

Presbitero v. Fernandez – L-19527, March 30, 1963, Rice Quotas

Facts: 

• In 1958, a judgment was rendered against Esperidion Presbitero by the Court of Appeals to reconvey certain lots or to pay their value upon failure.
• Attempts for amicable settlement failed.
• The sheriff levied and garnished sugar quotas allotted to plantation adhered to the Ma-ao Mill District and "registered in the name of Esperidion Presbitero as the original plantation-owner", but without presenting for registration copies thereof to the Register of Deeds.
• Presbitero failed to meet his obligations. An auction sale was then scheduled two days before Esperidion Presbitero passed away.
• Special administrator Ricardo Presbitero filed an urgent motion to stop the auction sale on the grounds that the levy on the sugar quotas was invalid because the notice thereof was not registered with the Register of Deeds, as for real property.

Issue: 

• Whether sugar quotas are real (immovable) properties. YES

Held:

Thus, under express provisions of law, the sugar quota allocations are accessories to land, and can not have independent existence away from a plantation, although the latter may vary. Indeed, this Court held in the case of Abelarde vs. Lopez, 74 Phil. 344, that even if a contract of sale of haciendas omitted "the right, title, interest, participation, action (and) rent" which the grantors had or might have in relation to the parcels of land sold, the sale would include the quotas, it being provided in Section 9, Act 4166, that the allotment is deemed an improvement attached to the land, and that at the time the contract of sale was signed the land devoted to sugar were practically of no use without the sugar allotment.

As an improvement attached to land, by express provision of law, though not physically so united, the sugar quotas are inseparable therefrom, just like servitudes and other real rights over an immovable. Article 415 of the Civil Code, in enumerating what are immovable properties, names —

10. Contracts for public works, and servitudes and other real rights over immovable property. 

It is by law, therefore, that these properties are immovable or real, Article 416 of the Civil Code being made to apply only when the thing (res) sought to be classified is not included in Article 415.

Capitol Wireless v. City of Batangas, G.R. No. 180110, May 30, 2016, Communication Cables

Facts: 

• Capitol Wireless Inc. (Capwire) provides international telecommunications services, with agreements covering international network of submarine cable systems such as the Asia Pacific Cable Network System (APCN).
• Capwire claims co-ownership of the "Wet Segment" of APCN but alleges that landing stations and Segment E in Nasugbu, Batangas belong to PLDT, and the Wet Segment lies in international waters.
• Capwire claims that as co-owner, it does not own any particular physical part of the cable system but, consistent with its financial contributions, it owns the right to use a certain capacity of the said system. 
• However, for loan restructuring purposes, Capwire claims that "it was required to register the value of its right," hence, it engaged an appraiser to "assess the market value of the international submarine cable system and the cost to Capwire.
• As a result, the Provincial Assessor issued Assessments of Real Property (ARP) against Capwire, considering the cable systems taxable real property.

Issue: 

• Whether the submarine communications cables be classified as taxable real property by the local governments. YES

Held:

Submarine or undersea communications cables are akin to electric transmission lines which this Court has recently declared in Manila Electric Company v. City Assessor and City Treasurer of Lucena City, as "no longer exempted from real property tax" and may qualify as "machinery" subject to real property tax under the Local Government Code.

To the extent that the equipment's location is determinable to be within the taxing authority's jurisdiction, the Court sees no reason to distinguish between submarine cables used for communications and aerial or underground wires or lines used for electric transmission, so that both pieces of property do not merit a different treatment in the aspect of real property taxation. 

Both electric lines and communications cables, in the strictest sense, are not directly adhered to the soil but pass through posts, relays or landing stations, but both may be classified under the term "machinery" as real property under Article 415(5)  of the Civil Code for the simple reason that such pieces of equipment serve the owner's business or tend to meet the needs of his industry or works that are on real estate. Even objects in or on a body of water may be classified as such, as "waters" is classified as an immovable under Article 415(8) of the Code. 

A classic example is a boathouse which, by its nature, is a vessel and, therefore, a personal property but, if it is tied to the shore and used as a residence, and since it floats on waters which is immovable, is considered real property.  Besides, the Court has already held that "it is a familiar phenomenon to see things classed as real property for purposes of taxation which on general principle might be considered personal property." 

Thus, absent any showing from Capwire of any express grant of an exemption for its lines and cables from real property taxation, then this interpretation applies and Capwire's submarine cable may be held subject to real property tax.

Meralco v. City Assessor of Lucena, G.R. No. 166102, August 05, 2015, Steel Tower

Facts: 

• In 1989, MERALCO received from the City Assessor of Lucena a notice that electric facilities, classified as capital investment of the company: (a) transformer and electric post; (b) transmission line; (c) insulator; and (d) electric meter, were subjected to real property tax as of 1985. 
• MERALCO appealed the Tax Declaration before the LBAA of Lucena City claiming that its capital investment consisted only of its substation facilities and that MERALCO was exempted from payment of real property tax on said substation facilities.
• LBAA: Held that:
1. the steel towers fell within the term “poles” expressly exempted from taxes under the franchise of MERALCO; and
2. the steel towers were personal properties under the provisions of the Civil Code and, hence, not subject to real property tax.  
• In 1997, MERALCO received a letter from the City Treasurer of Lucena assessing the company for real property delinquency on its machineries beginning 1990.
• MERALCO argues that its transformers, electric posts, transmission lines, insulators, and electric meters are not subject to real property tax, given that the definition of “machinery” under Section 199(o) of the Local Government Code, on which real property tax is imposed, must still be within the contemplation of real or immovable property under Article 415 of the Civil Code because it is axiomatic that a statute should be construed to harmonize with other laws on the same subject matter as to form a complete, coherent, and intelligible system.

Issue: 

• Whether the transformers, electric posts, transmission lines, insulators, and electric meters are not subject to real property tax being movable or personal properties. NO

Held:

The Court finds that the transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO are no longer exempted from real property tax and may qualify as "machinery" subject to real property tax under the Local Government Code. Nevertheless, the Court declares null and void the appraisal and assessment of said properties of MERALCO by the City Assessor in 1997 for failure to comply with the requirements of the Local Government Code and, thus, violating the right of MERALCO to due process.

The Court highlights that under Section 199(o) of the Local Government Code, machinery, to be deemed real property subject to real property tax, need no longer be annexed to the land or building as these "may or may not be attached, permanently or temporarily to the real property," and in fact, such machinery may even be "mobile."

The conclusions of the Court in the 1964 MERALCO case do not hold true anymore under the Local Government Code. Therefore, for determining whether machinery is real property subject to real property tax, the definition and requirements under the Local Government Code are controlling.

Star Two v. Paper City. G.R. No. 169211, March 6, 2013, Machineries and Equipment

Facts: 

• From 1990 to 1991, Paper City obtained several loans from RCBC, secured by chattel mortgages on its machinery and equipment.
• In 1992, RCBC unilaterally cancelled a deed of chattel mortgage on Paper City's merchandise and stocks-in-trade in 1992.
• RCBC, Metrobank, and Union Bank entered into a Mortgage Trust Indenture (MTI) with Paper City, increasing the loan to ₱280,000,000 and securing it with real estate mortgages and additional real and personal properties.
• Amendments to the MTI increased the loan, with additional securities, including newly constructed buildings and equipment located in the existing plant site.
• In 1997, Paper City defaulted on its loan obligations. RCBC foreclosed the properties listed in the MTI through an extrajudicial foreclosure sale.
• In 2002, Paper City filed a Manifestation with Motion to Remove and/or Dispose Machinery arguing that the machineries located inside the foreclosed land and building were deteriorating. And since the machineries were not included in the foreclosure of the real estate mortgage, it is appropriate that it be removed from the building and sold to a third party.

Issue: 

• Whether the subject machineries and equipment of Paper City Corporation (Paper City) are movable properties by agreement of the parties and cannot be considered as included in the extrajudicial foreclosure sale of the mortgaged land and building of Paper City. NO

Held:

By contracts, all uncontested in this case, machineries and equipment are included in the mortgage in favor of RCBC, in the foreclosure of the mortgage and in the consequent sale on foreclosure also in favor of petitioner.

Repeatedly, the parties stipulated that the properties mortgaged by Paper City to RCBC are various parcels of land including the buildings and existing improvements thereon as well as the machineries and equipments, which as stated in the granting clause of the original mortgage, are "more particularly described and listed that is to say, the real and personal properties listed in Annexes ‘A’ and ‘B’ x x x of which the Paper City is the lawful and registered owner." Significantly, Annexes "A" and "B" are itemized listings of the buildings, machineries and equipments typed single spaced in twenty-seven pages of the document made part of the records. The plain language and literal interpretation of the MTIs must be applied.

Indeed, the lower courts ought to have noticed the fact that the chattel mortgages adverted to were dated 8 January 1990, 19 July 1990, 28 June 1991 and 28 November 1991. The real estate mortgages which specifically included the machineries and equipments were subsequent to the chattel mortgages dated 26 August 1992, 20 November 1992, 7 June 1994 and 24 January 1995. Without doubt, the real estate mortgages superseded the earlier chattel mortgages.

The real estate mortgage over the machineries and equipments is even in full accord with the classification of such properties by the Civil Code of the Philippines as immovable property. Thus:

Article 415. The following are immovable property:

(1) Land, buildings, roads and constructions of all kinds adhered to the soil;

xxxx

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works;

WHEREFORE, the petition is GRANTED. Accordingly, the Decision and Resolution of the Court of Appeals dated 8 March 2005 and 8 August 2005 upholding the 15 August 2003 and 1 December 2003 Orders of the Valenzuela Regional Trial Court are hereby REVERSED and SET ASIDE and the original Order of the trial court dated 28 February 2003 denying the motion of respondent to remove or dispose of machinery is hereby REINSTATED.

FELS Energy, Inc. v. The Province of Batangas, G.R. No. 168557, February 16, 2007, Power Barge

Facts: 

• The National Power Corporation (NPC) entered into a lease contract with Polar Energy, Inc. over 3x30 MW diesel engine power barges moored in Batangas.
• Polar Energy, Inc. assigned its rights under the agreement to FELS Energy, Inc. (FELS).
• FELS received an assessment of real property taxes on the power barges.
• FELS referred the matter to NPC, reminding it of its obligation under the Agreement to pay all real estate taxes.
• NPC filed a petition with the Local Board of Assessment Appeals (LBAA) for the setting aside of the assessment and the declaration of the barges as non-taxable items; it also prayed that should LBAA find the barges to be taxable, the Provincial Assessor be directed to make the necessary corrections
• Provincial Assessor: Averred that the barges were real property for purposes of taxation under Section 199(c) of Republic Act (R.A.) No. 7160.

Issue: 

• Whether power barges, which are floating and movable, are personal properties and therefore, not subject to real property tax. NO

Held:

As found by the appellate court, the CBAA and LBAA power barges are real property and are thus subject to real property tax. This is also the inevitable conclusion, considering that G.R. No. 165113 was dismissed for failure to sufficiently show any reversible error. Tax assessments by tax examiners are presumed correct and made in good faith, with the taxpayer having the burden of proving otherwise. Besides, factual findings of administrative bodies, which have acquired expertise in their field, are generally binding and conclusive upon the Court; we will not assume to interfere with the sensible exercise of the judgment of men especially trained in appraising property. Where the judicial mind is left in doubt, it is a sound policy to leave the assessment undisturbed.  We find no reason to depart from this rule in this case.

In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et al., a power company brought an action to review property tax assessment. On the city’s motion to dismiss, the Supreme Court of New York held that the barges on which were mounted gas turbine power plants designated to generate electrical power, the fuel oil barges which supplied fuel oil to the power plant barges, and the accessory equipment mounted on the barges were subject to real property taxation.

Moreover, Article 415 (9) of the New Civil Code provides that "[d]ocks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast" are considered immovable property. Thus, power barges are categorized as immovable property by destination, being in the nature of machinery and other implements intended by the owner for an industry or work which may be carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or work.

City of Baguio v. Niño 487 SCRA 21, G.R. No. 161811, April 12, 2006, Order of Demolition

Facts: 

• The Bureau of Lands awarded to Narcisa A. Placino a parcel of land (Lot No. 10) in Baguio City.
• Francisco Niño, who has been occupying the lot, contested the award but he did not succeed.
• Attempts to enforce the Order of Execution failed. The Order of Execution was amended to involve the City Sheriff of Baguio City, the Demolition Team of Baguio City and the Baguio City Police Station.
• Demolition Team of Baguio City: Started demolishing the houses of Niño and his co-respondents by virtue of amended Order of Execution. The demolition was, however, temporarily stopped upon the instructions of DENR-CENRO.
• Niño filed Petition for Certiorari and Prohibition against DENR-CENRO, and authorities of Baguio.
• RTC: Dismissed Niño's petition.
• CA: Granted Niño's Petition for Review.
• Ordered to cease and desist from enforcing the amended order of execution by applying that Sec. 10(d) of Rule 39 of the ROC applies:
• SEC. 10. Execution of judgments for specific act.
• x x x x
• (d) Removal of improvements on property subject of execution. — When the property subject of the execution contains improvements constructed or planted by the judgment obligor or his agent, the officer shall not destroy, demolish or remove said improvements except upon special order of the court, issued upon motion of the judgment obligee after due hearing and after the former has failed to remove the same within a reasonable time fixed by the court. 

Issue: 

• Whether the CA misapplied Sec. 10(d) of Rule 39 of ROC. NO

Held:

Petitioners’ contention that the enforcement of the Amended Order of Execution does not need a hearing and court order which Sec. 10(d) of Rule 39 of the Rules of Court requires does not lie. 

That an administrative agency which is clothed with quasi-judicial functions issued the Amended Order of Execution is of no moment, since the requirement in Sec. 10 (d) of Rule 39 of the Rules of Court echoes the constitutional provision that "no person shall be deprived of life, liberty or property without due process of law, nor shall any person be denied the equal protection of the laws."

In general, the quantum of judicial or quasi-judicial powers which an administrative agency may exercise is defined in the enabling act of such agency. In other words, the extent to which an administrative entity may exercise such powers depends largely, if not wholly, on the provisions of the statute creating or empowering such agency.

There is, however, no explicit provision granting the Bureau of Lands (now the Land Management Bureau) or the DENR (which exercises control over the Land Management Bureau) the authority to issue an order of demolition — which the Amended Order of Execution, in substance, is.

Indeed,[w]hile the jurisdiction of the Bureau of Lands is confined to the determination of the respective rights of rival claimants to public lands or to cases which involve the disposition of public lands, the power to determine who has the actual, physical possession or occupation or the better right of possession over public lands remains with the courts.

The rationale is evident. The Bureau of Lands does not have the wherewithal to police public lands. Neither does it have the means to prevent disorders or breaches of peace among the occupants. Its power is clearly limited to disposition and alienation and while it may decide disputes over possession, this is but in aid of making the proper awards. The ultimate power to resolve conflicts of possession is recognized to be within the legal competence of the civil courts and its purpose is to extend protection to the actual possessors and occupants with a view to quell social unrest.

Consequently, this Court held: x x x the power to order the sheriff to remove improvements and turn over the possession of the land to the party adjudged entitled thereto, belongs only to the courts of justice and not to the Bureau of Lands.

In fine, it is the court sheriff which is empowered to remove improvements introduced by respondents on, and turn over possession of, the lot to Narcisa.

Laurel vs Abrogar, G.R. No. 155076, January 13, 2009, International Simple Resale

Facts: 

• Luis Marcos P. Laurel is one of the accused in Criminal Case No. 99-2425.
• The Amended Information charged Laurel with theft under Article 308 of the Revised Penal Code for allegedly stealing international long-distance calls belonging to Philippine Long Distance Telephone (PLDT) by conducting International Simple Resale (ISR).
• International Simple Resale (ISR) is a method of routing and completing international long distance calls using lines, cables, antenae, and/or air wave frequency which connect directly to the local or domestic exchange facilities of the country where the call is destined.
• Laurel filed a motion to quash on the ground that the factual allegations in the Amended Information do not constitute the felony of theft.

Issue: 

• Whether the international calls and business of providing telecommunication or telephone service are personal properties capable of appropriation and can be objects of theft. YES

Held:

The elements of theft under Article 308 of the Revised Penal Code are as follows:

1. that there be taking of personal property;
2. that said property belongs to another;
3. that the taking be done with intent to gain;
4. that the taking be done without the consent of the owner; and
5. that the taking be accomplished without the use of violence against or intimidation of persons or force upon things.

This Court consistently ruled that any personal property, tangible or intangible, corporeal or incorporeal, capable of appropriation can be the object of theft. xxx Consequently, any property which is not included in the enumeration of real properties under the Civil Code and capable of appropriation can be the subject of theft under the Revised Penal Code.

The only requirement for a personal property to be the object of theft under the penal code is that it be capable of appropriation. It need not be capable of "asportation," which is defined as "carrying away." Jurisprudence is settled that to "take" under the theft provision of the penal code does not require asportation or carrying away.

To appropriate means to deprive the lawful owner of the thing. The word "take" in the Revised Penal Code includes any act intended to transfer possession which, as held in the assailed Decision, may be committed through the use of the offenders’ own hands, as well as any mechanical device, such as an access device or card as in the instant case. 

Appropriation of forces of nature which are brought under control by science such as electrical energy can be achieved by tampering with any apparatus used for generating or measuring such forces of nature, wrongfully redirecting such forces of nature from such apparatus, or using any device to fraudulently obtain such forces of nature. In the instant case, petitioner was charged with engaging in International Simple Resale (ISR) or the unauthorized routing and completing of international long distance calls using lines, cables, antennae, and/or air wave frequency and connecting these calls directly to the local or domestic exchange facilities of the country where destined.

xxx

The business of providing telecommunication or telephone service is likewise personal property which can be the object of theft under Article 308 of the Revised Penal Code. Business may be appropriated under Section 2 of Act No. 3952 (Bulk Sales Law), hence, could be object of theft.

Interest in business was not specifically enumerated as personal property in the Civil Code in force at the time the above decision was rendered. Yet, interest in business was declared to be personal property since it is capable of appropriation and not included in the enumeration of real properties. Article 414 of the Civil Code provides that all things which are or may be the object of appropriation are considered either real property or personal property. Business is likewise not enumerated as personal property under the Civil Code. Just like interest in business, however, it may be appropriated. Following the ruling in Strochecker v. Ramirez, business should also be classified as personal property. Since it is not included in the exclusive enumeration of real properties under Article 415, it is therefore personal property.

As can be clearly gleaned from the above disquisitions, petitioner’s acts constitute theft of respondent PLDT’s business and service, committed by means of the unlawful use of the latter’s facilities. In this regard, the Amended Information inaccurately describes the offense by making it appear that what petitioner took were the international long distance telephone calls, rather than respondent PLDT’s business. The case is remanded to the trial court and the Public Prosecutor of Makati City is hereby DIRECTED to amend the Amended Information to show that the property subject of the theft were services and business of the private offended party.

Sibal v. Valdez, 50 Phil 512, G.R. No. L-26278, August 4, 1927, Sugar Cane

Facts: 

• In the civil case of Emiliano J. Valdez v. Leon Sibal, Valdez won.
• To satisfy the judgment, the sheriff attached the personal properties of Sibal including the sugar cane that was then growing on his lots. Valdez bought the properties in a public auction.
• Incidentally, Macondray & Co. already attached and then bought the lots at a public auction. 
• Within the one-year period given by law for redemption, Sibal offered to redeem the lots from Macondray & Co., and the sugar cane from Valdez.
• Sibal was able to redeem the lots. However, the redemption of the sugar cane was by the Valdez.
• Plaintiff's Argument:
• The sugar cane was real property for the same could be considered as “growing fruits” under par. 2 of Art. 415. 
• Defendant's Argument:
• The sugar cane was personal property, and therefore could not be the subject of the legal redemption.

Issues: 

• Whether the sugar cane is a real property. NO
• Whether the sugar cane is a personal property. YES

Held:

Act No. 1508, the Chattel Mortgage Law, fully recognized that growing crops are personal property. Section 2 of said Act provides: "All personal property shall be subject to mortgage, agreeably to the provisions of this Act, and a mortgage executed in pursuance thereof shall be termed a chattel mortgage." Section 7 in part provides: "If growing crops be mortgaged the mortgage may contain an agreement stipulating that the mortgagor binds himself properly to tend, care for and protect the crop while growing.

It is clear from the foregoing provisions that Act No. 1508 was enacted on the assumption that "growing crops" are personal property. This consideration tends to support the conclusion hereinbefore stated, that paragraph 2 of article 334 of the Civil Code has been modified by section 450 of Act No. 190 and by Act No. 1508 in the sense that "ungathered products" as mentioned in said article of the Civil Code have the nature of personal property. 

In other words, the phrase "personal property" should be understood to include "ungathered products."

We may, therefore, conclude that paragraph 2 of article 334 of the Civil Code has been modified by section 450 of the Code of Civil Procedure and by Act No. 1508, in the sense that, for the purpose of attachment and execution, and for the purposes of the Chattel Mortgage Law, "ungathered products" have the nature of personal property. The lower court, therefore, committed no error in holding that the sugar cane in question was personal property and, as such, was not subject to redemption.